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Is an auditor's propensity to issue going concern opinions a valid measure of audit quality?

Citation

Guo, Y and Delaney, D and Ahmed, A, Is an auditor's propensity to issue going concern opinions a valid measure of audit quality?, Australian Accounting Review, 93, (30) pp. 144-153. ISSN 1035-6908 (2020) [Refereed Article]

Copyright Statement

Copyright 2020 John Wiley & Sons

DOI: doi:10.1111/auar.12300

Abstract

A number of previous studies use auditor propensity to issue a going concern opinion (GCO) as a proxy of audit quality when examining a sample of financially distressed firms. This study examines whether audit quality (measured by discretionary accruals) influences the probability of financially distressed firms receiving GCOs using a non‐specific sample of 2937 firm‐year observations from Australia over the period 20112015. The study first investigates the association between financially distressed firms and the issuance of GCOs. This association is then re‐tested after separating the total sample into low and high audit quality subsamples. The results indicate that financially distressed firms are more likely to receive GCOs, confirming the application of ASA 570 Going Concern. However, financially distressed firms that receive GCOs from their auditors are limited to firms that have higher‐quality audits.

Item Details

Item Type:Refereed Article
Keywords:going concern opinion, audit quality, financially distressed firms
Research Division:Commerce, Management, Tourism and Services
Research Group:Accounting, auditing and accountability
Research Field:Accounting theory and standards
Objective Division:Expanding Knowledge
Objective Group:Expanding knowledge
Objective Field:Expanding knowledge in commerce, management, tourism and services
UTAS Author:Delaney, D (Dr Deborah Delaney)
ID Code:138270
Year Published:2020
Deposited By:Accounting and Corporate Governance
Deposited On:2020-03-30
Last Modified:2021-05-24
Downloads:0

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